Posts Tagged ‘Option Activity’

The Hotlist scans unusual option volume during the trading day and is available to all OptionsHouse customers, including those who sign up for a virtual trading account. Refer to this article for more information on Hotlist works.

There has been a lot of uncertainty surrounding for-profit education companies of late as the Obama Administration works to broaden the educational system and boost the nation’s percentage of college graduates.  The shares of Apollo Group Inc. (NASDAQ:APOL), parent of the University of Phoenix network, have reacted rather negatively to these developments.

Since topping out near the 65 level in late April, APOL has spiraled consistently lower, shedding almost 35% of its value during this time.  The shares are now within 10% of their 52-week low, up 58 cents today at $42.07.

APOL has hit the Hotlist today as a trio of October put options has gotten some unusual attention. It appears as though a large- investor is expecting significant downside (of at least 16%) in the shares over the next two months.

To me, it looks as though this may be a put tree strategy.  This is similar to a ratio put spread, or a put 1×2, but the trader is buying one near-the-money put and selling two different lower-strike out-of-the-money puts.

In today’s case with APOL, he appears to have bought 7,000 of the October 40 puts, paying a debit of $2.69, and sold 7,000 of both the October 30 and October 35 puts, collecting credits of 48 cents and $1.20, respectively. The net debit for each three-pronged spread is $1.01 apiece, or $707,000 in premium for the 7,000-lot.  This is the most the trader can lose if APOL is above the 40 strike at expiration.

(more…)